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  • Depreciation

    Hello all

    we are in the situation of moving out of our home for at least six months to move to a different city. We intend to rent out our house, but are unsure whether to claim depreciation or elect not to.

    On the elect not to side is simplicity, we don't have to make several messy calculations simply to have it reversed when we move back in six months later. (Especially because the rental period will cross financial years)

    On the other hand on page 32 of the IR 264 Rental Income guide published by the IRD it says "Once you have notified us of your election not to depreciate an asset you cannot claim depreciation in future years"

    In the long term it is likely that our present home will become a rental property for us, and at that point we will want to depreciate it.

    So here is a question for the accountants out there, what should we do? If we don't depreciate now, is there some way to depreciate in the future?
    New to property investing? See: Best PropertyTalk Threads for New and Old Investors And/Or:Propertytalk Wiki

  • #2
    Will the 6 months all fall into the same financial year (meaning no money has to change hands on depreciation either way)?



    • #3
      I wiould elect not to if only for six months , even if it spans 2 years (as you suggested) just because of the hassle. However, if there is the possibility you wont return, then you should claim.

      If you start up the rentali "business" later on (in in 2 years or so) I would thought it would start again. Your prior election related to a different "business" even though it is the same property.

      Expert comment is required. Note that no decision needs to be made till your year end accounts are made.


      • #4
        I agree with CJ on this one Monid.

        It's not worth depreciating as the time value of the depreciation is not worth the hassle.

        Also, I am pretty sure that you will be able to depreciate in the future if you were to rent it for a decent period.

        Good to see you thinking of the benefits of this rather than just acting without considering the issues properly.


        • #5
          Thank you for the replies, I am hoping the situation is as you describe Cube, it would certainly be easiest on us.

          I was wondering whether 'selling' the property to an LAQC might make a difference when it comes time to seriously turn this house into a rental?

          What do people think?
          New to property investing? See: Best PropertyTalk Threads for New and Old Investors And/Or:Propertytalk Wiki


          • #6
            If you claim depreciation now, and then sell to an LAQC, you will trigger depreciation clawback, which can be quite a nasty surprise.